Hermès operates a watch division with 120 watchmakers in Switzerland and annual revenue approaching €300m, but the business exists in a peculiar cage. Customers buy the watches—priced between €3,000 and €500,000—not because they want them, but because accumulating Hermès purchases improves the probability of being offered a Birkin or Kelly bag. The watchmaking ambition is real. The business case is polluted.
The problem is structural. Hermès generated €13.4bn in revenue in 2023, with leather goods accounting for roughly 48% of that total and operating at margins above 70%. Watches represent less than 3% of group revenue and operate at lower margins due to Swiss manufacturing cost structures. Store staff worldwide have learned to allocate scarce Birkins based on purchase history across all categories. A customer who buys three Hermès watches, a blanket, and two ready-to-wear pieces over eighteen months signals commitment. That customer gets the call when a black Togo Birkin 30 arrives. The watches are not purchased for their complications or finishing—they are purchased as expensive loyalty points.
This creates two second-order effects. First, Hermès cannot pursue independent watch distribution without undermining the leather-goods flywheel. Patek Philippe and Audemars Piguet built their brands through authorised dealers and specialist boutiques, creating communities of watch collectors who care about in-house movements and case architecture. Hermès cannot do this because pulling watches out of the integrated boutique ecosystem would remove a key lever for managing Birkin demand. The watches must stay behind the same door as the bags. Second, the brand cannot invest in the education and storytelling required to build a serious collector base without exposing the game. If Hermès aggressively markets its H1837 movement or its partnership with Vaucher Manufacture Fleurier, it risks attracting genuine watch enthusiasts who will quickly realise the brand's customers do not care about horology—they care about handbags.
The financial incentive to fix this is limited. Hermès executives understand that even a €500m watch business operating at 35% margins contributes less absolute profit than a 2% increase in leather-goods revenue. The family-controlled structure allows the house to ignore activist pressure, and the waiting lists for Birkins grow longer every quarter. Watch revenue could double and it would not move the stock price. Meanwhile, LVMH-owned TAG Heuer and Zenith compete in similar price bands with fully independent distribution and no handbag confusion. Richemont's Cartier operates a jewellery-watch hybrid model that does not require customers to pretend they care about escapements.
The tell will be Hermès's next watch boutique strategy. The house opened a watch-focused corner within its Paris Faubourg flagship in 2023, but it remains inside the main store perimeter. If Hermès opens a standalone watch boutique in Geneva or Hong Kong by Q2 2026, it signals a willingness to separate the categories and accept lower short-term leather-goods leverage. If it does not, the watchmaking division remains what it is now: a well-funded margin diluter that exists because the family believes Hermès should make beautiful things, not because the things sell on their own merit.
Richemont reported €5.27bn in watch revenue for the fiscal year ending March 2024, with Cartier contributing roughly €3bn of that total. Hermès will not reach those numbers without independence, and independence would cost it something more valuable than watch sales.